Wednesday 10/04/24

1. In BIG PICTURE NEWS, China and Russia get closer, the EU investigates Chinese wind turbines and BP gets downbeat but drilling is set to start at a big North Sea oil field
2. In CAR NEWS, Chinese vehicle sales rise but Chinese EV imports pile up at European ports and GM tries again with Cruise
3. In TECH NEWS, OpenAI and Meta prepare new AI models while Klarna puts AI over people
4. In MISCELLANEOUS NEWS, Frasers and Next circle the carcass of Ted Baker, Stonegate struggles and HSBC sells its Argentina business
5. AND FINALLY, I bring you a talented axe-man…

So China gets closer to Russia on supply chains, the EU investigates Chinese turbines, BP is downbeat but drilling is to start at a major North Sea oil field…

Don’t miss our next news roundup for April, it’ll be on Monday 29th April at 5pm with Jake Schogger of the Commercial Law Academy. HERE’S THE LINK TO REGISTER! See you there!

Did you know that there is a podcast to go with Watson’s Daily? In this podcast, I discuss two stories from the day’s edition in a bit more depth with a Watson’s Daily Ambassador, my mate Ralph (on the Weekly podcast) or a special guest. The idea of this is to help to give you more of an idea of what talking about this stuff could sound like 👍 You can find the podcasts on the buttons below:

China and Russia pledge to work together to maintain ‘supply chain stability’ (Financial Times, Joe Leahy, Wenjie Ding and Anastasia Stognei) shows that the two countries are flipping the Americans the bird just days after US Treasury secretary Janet Yellen warned Beijing against supporting Moscow’s war efforts. Foreign ministers from both communist superpowers presented a united front at a meeting in Beijing yesterday. * SO WHAT? * This is hardly surprising given that sanctions have already pushed the two superpowers together. China now buys about 40% of Russia’s crude oil, the majority of its coal and is it is now one of the top three buyers of Russian oil products, pipeline gas and LNG. Putin is expected to visit Xi in China later this year.

Then in EU launches inquiry into China’s subsidies for wind turbines (Daily Telegraph, Michael Bow) we see that the EU has now launched an investigation into wind turbines that are sold by Chinese suppliers to look into allegations that state subsidies from the Chinese government are giving Chinese companies an unfair advantage over European rivals. China is currently the

world’s biggest maker of wind turbines and makes up about 50% of the market globally. * SO WHAT? * This is just the latest investigation that the EC is getting involved in as an investigation was launched last year into Chinese subsidies to domestic EV makers, we saw last week that TWO investigations were launched into China’s solar panel makers and now we have this! Chinese solar companies are paying a high price for victory (Financial Times, Lex) highlights China’s dominance in solar (it accounts for a whopping 80% of global production capacity!) which has been driven by the fact that prices are almost two-thirds lower than US counterparts but also highlights the flipside of this in that production has grown so fast that there is now too much capacity. The share prices of Longi Green Energy Technology, JA Solar Technology and Trina Solar have more than halved over the last year. If the EC investigations conclude that they have had too much of a leg-up from the Chinese government then this over-capacity won’t have anywhere to go, worsening their respective situations (which is perhaps why Longi recently said that it was going to cut 30% of its workforce). The only thing is that the Chinese government is unlikely to take this lying down so we can only wait and see what it does in retaliation.

In oil news, BP expects $400m hit to profits from falling fuel prices (Daily Telegraph, Jonathan Leake) shows that BP warned investors that falling oil and gas prices will dent its profits for Q1 – but then it seems that this could be short-lived as oil prices seemed to be turning a corner yesterday. Meanwhile, Drilling to begin at major North Sea oil field (Daily Telegraph, Jonathan Leake) shows that UK energy company EnQuest is about to start drilling at the biggest oil field discovered in the North Sea for at least 20 years despite an overall push to net zero. Labour has said that it would block new production on environmental grounds while energy firms had said that the UK would be shooting itself in the foot if it did this without having alternatives in place. I have no doubt that this will be an issue that will come up in the lead-up to the general election…

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

China vehicle sales rise, car imports pile up at European ports and GM tries again with Cruise…

China Vehicle Sales Rebound (Wall Street Journal, Jiahui Huang) shows that China vehicle sales increased in March, rebounding from a weaker February in a signal that demand might be getting back on track. BYD remained the top seller of EVs in the country in March, followed by Tesla, maintaining the top spot after it overtook Tesla in Q4 of 2023. Chinese exports of passenger cars hit a new high as they had a 39% hike to 406,000 units over the month but European ports turned into ‘car parks’ as vehicle imports pile up (Financial Times, Arjun Neil Alim, Robert Wright, Peter Campbell and Gloria Li) shows that although the Chinese EVs are making their way to Europe, they are piling up at European ports because they don’t have the logistics properly in place while demand for EVs overall continues to falter. Some industry execs say that Chinese carmakers are seeing lower sales than expected while some Chinese brand EVs have been stuck at European ports for up to 18 months! This comes at a time where the likes of BYD, Great Wall, Chery and SAIC are all looking to up exports to Europe. China’s car exports in 2023 were 58% higher than they were in the previous year but it seems that Chinese makers are having problems getting haulage companies to prioritise their orders, which is adding to the logjam. * SO WHAT? * I don’t think that the Chinese makers are having problems because they are Chinese per se – it’s more the case that they are relative newcomers and

these logistical issues would happen with any “unestablished” maker. The problem, though, is if the EC decides to slap big tariffs on Chinese EVs as a result of their current investigations – because this could mean that the piling up could get worse as consumers decide to opt for non-Chinese alternatives (or just stick with petrol).

Meanwhile, GM’s Cruise Attempts Comeback for Its Driverless Fleet—With Human Drivers First (Wall Street Journal, Suryatapa Bhattacharya) shows that GM’s driverless division, Cruise, is making efforts to get back on the road. Cruise suspended driverless operations nationwide in October after a number of high profile incidents (the most infamous of which was when one of its driverless vehicles hit a woman who’d just been hit by a hit-and-run driver) forced it to take around 400 self-driving cars in cities including Phoenix, San Francisco and Austin out of service. It said that will be sending out cars with humans behind the wheel to create maps and gather road information in Phoenix and then roll out the same thing out in other cities. They will collect data on features including speed limits, stop signs and traffic lights. * SO WHAT? * This is an OK move, but I don’t think anyone can deny that incidents that involved Cruise vehicles in particular have set back the advancement of driverless as a viable transportation option by MANY years. It will take AGES before they reach the stage that they did before those incidents IMO. Driverless is a dead duck for the moment.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

OpenAI and Meta make more advanced  models and Klarna puts AI ahead of people…

In OpenAI and Meta ready new AI models capable of ‘reasoning’ (Financial Times, Madhumita Murgia and Cristina Criddle) we see that the two companies are about to release new AI models that can reason and plan, bringing them ever closes to reaching superhuman cognition in machines. Meta’s due to release Llama 3 in the next few weeks while GPT-5 is coming “soon”. Other companies including Google, Anthropic and Cohere are also working on new versions of their own LLMs. * SO WHAT? * Progress is inevitable and it’ll be interesting to see what the new models bring!

Then in Klarna opts for AI over hiring new staff (The Times, Katie Prescott) we see that Klarna is planning to expand its business by using more generative AI capability instead of taking on new employees! The company has already cut down on hiring – it said earlier this year that its virtual assistant tool had replaced 700 out of 3,000 customer service jobs, saving the company about $40m a year! * SO WHAT? * It seems to me that many call-centre-type jobs are going to be rendered obsolete by AI as many interactions are scripted – something that AI is very good with. When you consider that the average customer support time has fallen from 3minutes to just 7 seconds thanks to AI (while customer satisfaction remained the same!) you can see that the writing is on the wall. 

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Potentially bidders circle Ted Baker, Stonegate needs a stiff drink and HSBC sells its business in Argentine…

In a quick scoot around some of today’s other interesting stories, Frasers and Next vying for collapsed retailer Ted Baker (Daily Telegraph, Daniel Woolfson) shows that the two high street retailers are emerging as potential buyers of the failed fashion brand. Ted Baker’s UK parent, No Ordinary Designer Label, fell into administration last month. It is too early to tell whether any stores will ultimately stay open or whether the potential buyers will just take on the IP and sell merchandise via their own respective online and offline outlets.

UK’s biggest pubs group Stonegate struggles to refinance £2.2bn debt pile (The Guardian, Rob Davies) highlights trouble at the UK’s biggest pubs and bars group (it owns brands including the Slug & Lettuce and Be At One chains) as it warned that there is no

guarantee it can continue as a going concern. Talks with potential lenders are ongoing, but things are not looking good at the moment. Stonegate Pub Company is ultimately owned by TDR Capital, the PE firm that also owns Asda. It has been trying to refinance its debts since at least February. Troubles in the hospitality industry continue…

Then in HSBC shedding no tears over Argentine exit (The Times, Ben Martin) we see that the banking giant has decided to pull out of Argentina, following withdrawals from countries including Canada, New Zealand, Greece, France and Oman in addition to mass-market retail banking in America. CEO Noel Quinn has been intent on streamlining the company and focusing particularly on its Asia business. The company said that the Argentinian business was largely domestically focused, so I guess this makes strategic sense – particularly if HSBC is no longer set on being “the world’s local bank”. Argentina’s also in dire economic straits at the moment so it’s probably best to get out of there anyway.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

…in other news…

The guy in this video seems a bit mad – but incredibly talented! Who knew axes could be so a) varied and b) fun!